The German division of Lair creator Factor 5 has confirmed that the San Rafael, CA-based U.S. developer has closed, following recent financial trouble.

"We are sorry to announce the closure of the San Rafael-based Factor 5, Inc. studio, but the obstacles created by the sudden bankruptcy of Brash Entertainment for the continuation of operations have turned out too great to overcome in the current economic climate," said CEO Achim Mollar.

The European division, Factor 5 GmbH is headquartered in Cologne, Germany, and Mollar says it is "entirely unrelated to Factor 5, Inc. and the circumstances surrounding Factor 5, Inc.'s recent challenges."

Reports of heavy layoffs at the studio late last year raised speculation around its imminent closure as far back as December.

The U.S. arm of the company, headed by Julian Eggebrecht, was best known for Star Wars: Rogue Squadron and early PlayStation 3 title Lair. The latter received a high pre-release profile, but was critically panned and commercially unsuccessful.

The closure of Brash Entertainment hit the studio hard. The movie license-focused publisher's titles were poorly received almost immediately on its entry to the market, and it soon saw an exodus of investors and executives.

The publisher's collapse -- compounded by the simultaneous advent of the economic recession -- had reverberations for any studio depending on a deal with Brash, such as 7 Studios, which was acquired by Activision after struggling financially.

"Although we are saddened by Factor 5, Inc.'s situation, our corporation will remain unaffected by these developments and has partnered with both old and new friends in the industry who will reveal our upcoming projects over the next months," Mollar says.